Richemont faces ISS revolt: governance and pay under scrutiny pre-AGM
Bottom Line Impact
Governance pressure around voting rights and pay transparency threatens a near-term valuation overhang, but targeted reforms can compress Richemont's discount, lower cost of capital, and reinforce brand equity by signaling performance alignment without sacrificing strategic autonomy.
Key Facts
5- ISS advises voting against re-election of Chairman Johann Rupert and board member Anton Rupert for the September AGM
- Rupert family holds 9.1 percent of equity but controls 50 percent of voting rights via dual-class structure
- ISS opposes proposed executive committee bonuses totaling CHF 30.6m, citing lack of disclosed performance targets and results
- Currency reference: CHF 30.6m equals approximately USD 38m at current rates
- Timeline: Proxy campaign and investor outreach required within the next 2 to 6 weeks ahead of the AGM vote
Time Horizons
Key Roles Affected
Executive Summary
ISS recommends voting against Richemont's chairman and a board member, and opposing CHF 30.6m executive bonuses, spotlighting the group's unequal voting structure ahead of the September AGM. This elevates near-term governance risk, potentially widening Richemont's valuation discount versus peers unless the board commits to clearer remuneration targets and governance enhancements.
Actionable Insights
Immediate Actions (Next 30-90 days)
Announce before AGM a governance enhancement package including pay KPI disclosure, an annual non-binding vote on remuneration policy, and a timeline to add at least one new independent director with deep digital and Asia expertise within 6 months
Rationale: Directly addresses ISS concerns, improves investor confidence, and preserves strategic control while signaling accountability
Role affected:Chairman and Lead Independent Director
Urgency level:immediate
Publish a detailed variable compensation scorecard with 3 to 5 quantifiable KPIs for FY25, including EBIT margin expansion, inventory turns, client retention, and DTC e-commerce growth, with target and achieved ranges
Rationale: Transparency on pay-for-performance is the decisive lever to flip proxy advisor recommendations for compensation items
Role affected:CFO
Urgency level:immediate
Short-term Actions (6-12 months)
Run a focused investor outreach to top 20 shareholders and governance-focused funds within 2 to 3 weeks, offering commitments on compensation disclosure and a mid-term review of voting rights structure
Rationale: Secures swing votes and reduces withhold risk on director elections and remuneration items
Role affected:CEO
Urgency level:short-term
Accelerate high-ROI clienteling and VIC activation to deliver a visible Q3 sales and margin print, offsetting governance noise
Rationale: Operational outperformance can temper governance discount and support narrative of performance alignment
Role affected:CMO and Maison CEOs
Urgency level:short-term
Risks & Opportunities
Primary Risks
- Say-on-pay or remuneration items receive less than 70 percent support, triggering negative governance signals and media scrutiny
- High withhold votes against chair and family-affiliated director increase perceived key-man and control risk, elevating cost of equity by 30 to 70 bps
- ESG rating downgrades and index exclusion reduce access to governance-sensitive capital
Primary Opportunities
- Pre-emptive disclosure and board refresh narrow valuation discount by 5 to 10 percent over 6 to 12 months
- Broader investor base from governance-focused funds enhances liquidity and lowers equity risk premium
- Clear KPI alignment improves maison-level execution and supports margin expansion of 50 to 100 bps